Market segmentation research in B2B – informing targeted marketing

Market segmentation research in B2B – informing targeted marketing

How does market segmentation research inform targeted marketing in B2B? By collecting data and insights for a model that divides your target market into customer groups with similar traits – such as behavior, needs, wants, and profitability potential.

Why market segmentation research matters in B2B

One of the best ways to make your sales and marketing more efficient is by leveraging a segmentation model that’s unique to your business, sector, and target market.

Segmented campaigns get 101% more clicks and 14% more opens than non-segmented ones, according to MailChimp, because the messages resonate more.

What is a market segmentation in B2B, exactly? It’s the splitting of your market into different groups of clients with comparable traits.

This blog provides a deep dive into the market segmentation process, plus how it supports targeted marketing strategies and sales strategies.

The benefits of having a market segmentation strategy include helping your sales and marketing teams:

  • Prioritize the right customers
  • Allocate budget and resources efficiently
  • Increase your win ratio with prospects
  • Understand your audience
  • Improve marketing channel use and messaging
  • Get insights for product development
Contents

Types of market segmentation

Data sources for market segmentation projects

The research process – how to do a segmentation project

Activation – implementing targeted marketing strategies

Best practices for market segmentation projects in B2B

 

 

Types of market segmentation

Consumer or B2C market research often uses a type of model driven by one or more of these factors:

  • Demographic – e.g. age, gender, income, education, marital status
  • Geographic – e.g. city, state, country
  • Technographic – e.g. mobile use, desktop use, wearables use
  • Psychographic – e.g. personality traits, interests, values
  • Behavioral – e.g. feature use, product use, tendencies, frequent actions

However, some of these don’t make sense for a B2B audience – a demographic segmentation in particular. Whereas a B2C segmentation separates different individual consumers into groups, a B2B one categorizes the variety of businesses in your client base. 

Instead, these are some of the most common types of segmentation for B2B research – each with advantages and disadvantages:

  • Firmographic – e.g. sector, number of employees, revenue, locations. Usefully, this data is easy to collect and does not change much over time. However, this approach has limitations, as businesses with similar firmographics do not necessarily have similar challenges to solve.
  • Decision-maker type – e.g. job titles. Segmenting this way can help you tailor a marketing campaign to individual recipients. But the advantages and disadvantages of this approach are similar to those of a firmographic segmentation.
  • Profitability or potential – e.g. expected lifetime customer value. This will help you prioritize resources and it supports account-based marketing. But it’s not always clear what a company’s potential or profitability will be, particularly if it’s a new lead.
  • Psychographic – e.g. needs and attitudes such as company goals or pain points. This will support your targeting but the data is more subjective and therefore, tricky to obtain accurately using quantitative research alone – it’s also difficult to implement.
  • Behavioral – e.g. purchase history, channel usage, content consumed. This type of segmentation combines the benefits of a firmographic and psychographic approach without their disadvantages. But it’s tough to collect data for offline behavior and it won’t tell you how they’ll act in the future.
  • Jobs-to-be-done – i.e. the job they’re hiring you to do for them. This is a less limited and broader segmentation approach, helping you to find new opportunities and supporting innovation. As with psychographic research, this approach often requires both quantitative and qualitative research.

Data sources for market segmentation projects

For a B2B segmentation, to get accurate data that reflects your customer base, typically you need to do some primary research. But before starting primary research, secondary sources can save you a lot of time and money.

Reviewing the information you already have, or that is free and publicly available, is a simple way to get some segmentation information on customers and prospects:

There are several sources of customer behavior data, including: 

  • CRM tools
  • Google Analytics
  • Point-of-sale systems
  • Business intelligence tools
  • Product intelligence tools

These can show how customers spend, which products and services they use, how they engage with your marketing, and how they interact with your products.

Meanwhile, customer satisfaction surveys and feedback forms provide valuable information about customers’ brand loyalty or perceptions, as well as their attitudes and pain points.

To learn more about prospects, online communities and social media can give you insights into their challenges.

The research process – how to do a segmentation project

#1. Setup

First of all, agree on your objectives with key stakeholders. What precisely do you need the customer segmentation to help you achieve from sales and marketing perspectives?

Then review the secondary data sources available to you. These may answer some of your questions already, either partially or in full.

When setting up the primary research part of the project, make a plan to keep your key stakeholders in the loop and seek their input at key milestones. This helps ensure that the project meets everyone’s needs and doesn’t have any big information gaps post-fieldwork.

#2. Design

For the design stage, you need to come up with the right questions (and usually, a range of answer options too) for respondents, based on the type of segmentation you’re aiming for.

As an example, a behavioral-led segmentation needs to include questions about decision-makers’ purchase history, channel usage, and so on.

You also need to weigh up the pros and cons of using quantitative or qualitative research methodologies. Where feasible, it’s often highly beneficial to use both.

Quantitative research involves a high number of online surveys with closed questions, while qualitative research uses fewer interviews in the form of depth interviews or focus groups.

Usually, when researchers talk about segmentation studies, they mean a quantitative data set which they will put through a robust, statistical analysis – more on this later.

But buyer personas, based on qualitative data, are a different style of segmentation. They have less rigor behind them but are still insightful and useful, especially for UX teams and marketers.

#3. Recruitment and fieldwork

Whether you’re using quantitative and/or qualitative approaches, the project’s success relies on getting as many genuine and relevant B2B decision-makers to take part as possible.

Compared to consumer research, it’s more challenging to recruit decision-makers for a B2B research project. These are some of the options:

  • CRM database: This is the source most likely to give you a robust amount of data that accurately represents your current customer base. That said, if you’re looking to attract new types of customers, you’ll need to leverage additional data sources too.
  • Third-party recruitment: Market research agencies and specialist recruiters can find respondents for segmentation projects. But to get genuine business decision-makers taking part in B2B projects, be very wary about the use of research panels – typically, most respondents here are consumers.
  • Social media: In particular, LinkedIn is an excellent starting point for any project where you need to recruit B2B decision-makers. Most online profiles are accurate, up-to-date, and similarly informative to resumes or CVs – however, it is challenging to recruit at scale via this recruitment method.

To get what you need from primary data collection, you need enough responses for the data to be reliable. Also, the interview distribution should reflect the target market. 

Crucially, the individuals taking part must be legitimate B2B decision-makers in your sector – check the data as you go and screen out any rogue respondents.

If you’re planning to use statistical analysis techniques at the analysis stage, you’ll need a robust sample size – qualitative research alone won’t be enough to provide this.

#4. Analysis and reporting

To analyze quantitative data for a segmentation project, format it into tables and then check thoroughly.

The data answers will appear row by row. Also cut the data into groups based, at the very least, on respondents’ answers to the profiling questions – these initial segments will be columns in your tables.

Look for interesting or statistically significant patterns in the tables and potentially, create additional breaks for these groups too. But for the most accurate and scientific segmentation model, you’ll need the help of one or more specialist statistical analysis techniques such as:

  • Cluster analysis
  • Key driver analysis
  • Factor analysis
  • Correlation/regression

To analyze any qualitative data you have, review it and look for some initial themes.

Then brainstorm the findings and revise the themes. You’re looking for insights that help explain the reasons why – for example – a specific segment exists, acts a certain way, or has particular purchase habits.

Activation – implementing targeted marketing strategies

Finally, develop materials that will help stakeholders understand the market segments. Use in-person or virtual workshops to walk them through the outputs and address any queries.

For example, you can create simple one-pagers showing what makes them unique, as well as the size and profitability potential of each segment.

Additionally, it’s crucial to embed the customer segments into your existing processes so they are easy to use. Add a segment field to your CRM and include segmentation profiling questions in the onboarding process, so you can add new customers to your segmentation.

If you’re creating more qualitative buyer personas for the sales and marketing teams, these need to be a memorable and engaging representation of your customers. If they’re too dry, your teams won’t use them often enough and they’ll have diminishing returns.

The final materials need to be easy to share and scan – visualization techniques, such as vox pop videos, help to bring your personas to life. Again, any buyer persona data should work with your existing sales or marketing processes, so that it’s not standalone.

When targeting your marketing campaigns by segment, measure the campaign performance and compare it with your pre-segmentation data to monitor the improvement.

Best practices for market segmentation projects in B2B

#1. Aim for the right mix of art and science

Most segmentation models are based on a mix of:

  • ‘Science’ – the robust validation from quantitative research and running a statistical analysis
  • ‘Art’ – the deep understanding of customer attitudes and reasoning from qualitative research methods

Too much science can lead to a segmentation that is statistically ideal but not pragmatic, because your stakeholders struggle to recognize the segments among their customers.

But too much art will mean the segmentation does not use enough tangible evidence, so it falls apart under scrutiny. The key is finding the right balance between art and science for each market segmentation research project.

Therefore, typically, we recommend conducting both qualitative and quantitative research for segmentation studies. 

#2 Allow for some flexibility in the segmentation

You might start the project wanting to create a needs-based segmentation, but soon find that every customer has the same ones.

Instead, the interim results suggest that a behavioral segmentation works better for your objectives. To pivot, you need to be prepared from the outset for the possibility of changing the approach later on.

Be flexible on the type of segmentation you want to create. There are many unknown factors at the outset of any segmentation project, but the best outcomes tend to come when your research approach is flexible enough to adapt as the project unfolds.

#3. Sense check the final model

Once you have created a potential segmentation model, check it before implementation. Ask questions such as:

  • Is each segment different in a meaningful way?
  • Do they intuitively make sense?
  • Are they easy to explain to colleagues?
  • Do clients tend to belong to a single market segment, or multiple, or none at all?
  • Can you develop a strategy to target each segment?
  • Are the segments large enough to justify the resources that you’ll use on them?
  • Is each segment still likely to exist in a few years?

After interrogating it, if the segmentation looks like it won’t work as intended, continue the analysis to find solutions.

Summary

Why market research segmentation matters in B2B

Benefits of having a market segmentation strategy include helping your sales and marketing teams: prioritize the right customers; allocate budget and resources efficiently; increase your win ratio with prospects; understand your audience; improve marketing channel use or messaging; and get insights for product development.

Types of market segmentation

These are some of the most common types of segmentation for B2B research: firmographic; decision-maker type; profitability or potential; psychographic; behavioral; and jobs-to-be-done.

Data sources for market segmentation projects

But before starting primary research, secondary sources can save you a lot of time and money. There are several sources including CRM tools; Google Analytics; point-of-sale systems; business intelligence tools; product intelligence tools; customer satisfaction surveys; and social media.

The research process – how to do a segmentation project

You need to weigh up the pros and cons of using quantitative or qualitative research methodologies. Where feasible, it’s often highly beneficial to use both.
For the most accurate and scientific segmentation model, you’ll need specialist statistical analysis techniques such as cluster analysis; key driver analysis; factor analysis; and correlation/regression.

Activation – implementing targeted marketing strategies

It’s crucial to embed the customer segments into your existing processes so they are easy to use. Add a segment field to your CRM and include segmentation profiling questions in the onboarding process, so you can add new customers to your segmentation.

Best practices for market segmentation projects in B2B

We recommend that you: aim for the right mix of art and science; allow for some flexibility in the segmentation; sense check the final model.

Chris Wells
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